Correlation Between Catalent and Northstar Clean

Can any of the company-specific risk be diversified away by investing in both Catalent and Northstar Clean at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Catalent and Northstar Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catalent and Northstar Clean Technologies, you can compare the effects of market volatilities on Catalent and Northstar Clean and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Catalent with a short position of Northstar Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalent and Northstar Clean.

Diversification Opportunities for Catalent and Northstar Clean

0.39

Correlation Coefficient

Catalent  Northstar Clean

Weak diversification

The 3 months correlation between Catalent and Northstar is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech and Catalent is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Catalent are associated (or correlated) with Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Catalent i.e., Catalent and Northstar Clean go up and down completely randomly.

Pair Corralation between Catalent and Northstar Clean

Given the investment horizon of 90 days Catalent is expected to generate 8.9 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, Catalent is 5.95 times less risky than Northstar Clean. It trades about 0.14 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Northstar Clean Technologies on September 24, 2024 and sell it today you would earn a total of  9.00  from holding Northstar Clean Technologies or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Catalent  vs.  Northstar Clean Technologies

Catalent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Northstar Clean Tech

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and Northstar Clean

The main advantage of trading using opposite Catalent and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent position performs unexpectedly, Northstar Clean can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Northstar Clean will offset losses from the drop in Northstar Clean's long position.

The idea behind Catalent and Northstar Clean Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..